Tennessee Retailer Sued Over Grading Reports

September 1, 2014byRob Bates

A new court case may test whether jewelers bear legal liability for the representations on their grading reports.

Genesis Diamonds, the Nashville, Tenn., retailer whose use of reports from EGL International made it the subject of a critical local newscast in May, has now been slapped with a lawsuit over how it uses those reports.

The complaint, filed July 22 in circuit court for Davidson County, Tenn., charges the three-store chain with fraud and violations of the Tennessee Consumer Protection Act for “misrepresent[ing] the quality and characteristics of the diamonds it sells.”

According to the suit, on March 10, plaintiff James Wells bought a diamond engagement ring at Genesis with what the store called a 2.06 ct. G VS2 center stone, based on its EGL International report. He paid $17,793 for the diamond, though the suit says a Genesis-supplied appraisal valued it at $27,500 based on its grading report. (Genesis responds that the appraisal was for both the diamond and the mounting, and says the customer paid a total of $21,293.)

The suit says that the stone’s diamond grading report was from EGL International, and that the Israeli lab “is widely known to overstate the qualities, and consistently the value, of the diamonds it grades.” A month later, the diamond received a GIA report that said it was a J SI2, worth about $16,000 on the Rapaport list.

The suit also maintains that Genesis “is trafficking in what amounts to counterfeit certificates,” since EGL International reports are subject to a border ban requested by EGL USA. (The ban is 10 years old and is currently the subject of litigation.)

The suit seeks triple the difference between what the stone was represented as and what it is actually worth (about $30,000), plus attorney fees and other damages.

Genesis attorney Eli Richardson tells JCK that the suit is “factually and legally without merit.” Richardson told a local newscast that the GIA and EGL International reports agreed on the cut and carat weight, so the only differences were in color and clarity, which are “subjective,” he said.He added in reference to the border ban: “It would come as significant news to jewelers all over the country that somehow there is something wrong with them being in possession of EGL International certificates.”

The suit was brought by attorney Brian Manookian, who has emerged as a persistent Genesis nemesis. He once sued the store himself over a stone he claimed had been ­overgraded. Subsequently, he represented a rival jeweler whom Genesis had sued for defamation over a comment made in his store. (That suit was dropped.)

“I expect that there are thousands of cases against Genesis Diamonds by similarly situated plaintiffs,” says Manookian, adding that the cases may be consolidated into a class action.

EGL International did not respond to a request for comment on the ­lawsuit. In response to the ­initial newscast, however, CEO Guy ­Benhamou denied that his lab had lower standards, maintaining that labs often differ on grades.